ICICI Venture in talks to buy stake in KIMS Hospitals

May to invest Rs 150-180 cr in KIMS

With more private equity (PE) funds looking for exits from their five-to-six-year-old investments, year 2014 is set to witness a lot of secondary transactions where PEs sell stakes to another PEs. In a recent development, ICICI Venture is in talks to acquire stake in Andhra Pradesh-based hospital chain Krishna Institute of Medical Sciences Ltd (KIMS).

According to sources in the know, ICICI Venture plans to buy a 15 -20 per cent stake currently held by Quadria Capital Investment Advisors, an independent Asia-focused health care private equity fund, apart from another 10 per cent stake from the management. ICICI Venture is likely to invest Rs 150-180 crore in KIMS, sources added.

Currently, Krishna Institute of Medical Sciences provides a total of 1,600-bedded super specialty services across Andhra Pradesh. It has a 300-bedded super specialty hospital in Secunderabad.

In December 2009, Milestone Religare had invested Rs 60 crore in KIMS through its India Build-Out Fund 1, a Rs 600-crore private equity fund backed by Religare Enterprises and Milestone Capital. In March 2013, Quadria Capital had acquired Milestone Religare, an equal joint venture PE firm between Religare and Milestone. As part of the acquisition, Quadria had added the healthcare portfolios such as KIMS, Healthcare Global Enterprises and Medica Synergie Pvt Ltd.

Mails sent to Bhaskar Rao, managing director and CEO of KIMS, and Amit Varma, managing partner at Quadria Capital Investment Advisors, did not elicit any response. When contacted, Vishakha Mulye, managing director and CEO of ICICI Venture, refused to comment.

A recent report from Grant Thornton said: "The common theme across most of the top PE deals in health care in 2013 has been exit of private equity funds - secondary deals. This is another trend we expect to continue witnessing in 2014. A number of pharma and health care delivery businesses raised capital from PE funds between 2005 and 2009 needing to be exited in the next year or two."

Last year, ICICI Venture had sold its five-year old investment in Mysore-based Vikram Hospitals to Renuka Ramnath-led Multiples Alternate Asset Management.

Year 2013 has seen largest deals in hospitals sector where Carlyle invested $154 million in Medanta Medicity, IFC invested $100 million in Fortis Healthcare, Oppenheimer Funds' $95-million deal with Apollo Hospitals and Rs 550-crore investment by KKR in Apollo Hospitals Group.

The hospital sector in India remains attractive for PE investors due to its growing potential. In the backdrop of the increased gap between demand and supply in the healthcare space in India, major hospitals are on an expansion spree, raising more capital from PE investors. India has a ratio of nine hospital beds for 10,000 people against 33 beds in the UK and 30 beds in the US. The country also lags behind China and Brazil, with 42 and 24 beds, respectively.

The healthcare market in India, estimated to be $78 billion, grew at 11 per cent on an average from 2008 through 2012. According to a CARE Research report, the hospital segment accounts for roughly 70 per cent of the total healthcare market. India will need another 1.75 million beds by 2025.